Company Voluntary Arrangement (CVA)
A CVA can ease your cash flow and help turn around your business.
Allowing you to potentially prioritise key suppliers, a CVA can help you trade back to profitability.
Reduced Creditor Repayments
Continue to trade with a quickly improved cash flow.
Debts significantly reduced
Repay what you can at an affordable rate.
Interest stopped
No more interest or charges added on any of the included debts.
Full legal protection
All collection activity and legal action, such as a winding up petition, stopped
What is a CVA?
A CVA is a formal insolvency procedure allowing a financially troubled company to reach a binding agreement with its creditors about payment of all, or part of its debts over an agreed period of time.
The CVA is based on the principle of preserving the company and enabling it to continue trading to rebuild turnover and profit, paying back what it can afford over the agreed period of time (usually 5 years). Often creditors will be required to write off significant amounts of debt as part of the CVA agreement. If a CVA is agreed, your limited company can continue trading.
We can determine if a Company Voluntary Arrangement is a viable solution for your business.
Benefits of a CVA
Keep Trading – Keep Earning
Directors remain in control of the company allowing for the best chance of survival.
Prioritise Creditors
Continued supply of goods and services can be essential for trading. Debts to such suppliers can be prioritised.
One affordable monthly repayment
Payment based on affordabilty – not how much is owed.
Creditor Protection
Stop pressure from tax, VAT and PAYE while the CVA is being prepared. When approved all included creditors are prevented from taking legal action.
No need to tell customers
No investigation into the directors’ conduct, nor any investigation into other companies which may be run by the director.
Flexible Repayments
If your business income is seasonal, your creditors may agree to allow payment variations.
Is A CVA Right For My Business?
When Is a CVA Appropriate?
A company must be considered insolvent or already be in administration to be eligible to enter into a CVA.
If it is possible to continue in business if payments to debts can be reduced a CVA needs to be considered as a possible solution.
A CVA may be appropriate where:
- Directors are committed and want to avoid liquidation.
- It is the directors’ view that it can be successful and profitable in the future but needs a bit of time.
- The company needs to restructure.
- The company has experienced late payers or bad debts which have affected short-term cash flow.
- Directors have tried to negotiate new terms with their creditors directly but failed.
- Creditor pressure is preventing the company from moving forward.
Is My Company Insolvent?
There are three insolvency tests to establish if your company is insolvent:-
Cash Flow Test
Can the company pay its debts as and when they fall due? If the company is suffering from poor cash flow and as a result, it is unable to meet payment terms of its creditors or maybe it is not paying national insurance and income tax contributions for directors or staff, then your company is more than likely insolvent.
Balance Sheet Test
Does the company owe more than it owns, or in other terms are the company’s assets exceeded by its liabilities? If the answer is yes, then the company is more than likely insolvent.
Legal Action Test
If a creditor has taken legal action and has obtained a county court judgment (CCJ) or a Statutory Demand against the company, this may indicate the company’s insolvency and allow the creditor to petition to wind it up. Therefore if your company has one or more CCJs and/or a Statutory Demand, it is more than likely insolvent.
Considering a CVA?
A CVA can be an excellent solution to solve a company’s debt problems and once the arrangement has been completed, any outstanding debt will be written off.
Graham Cordiner - CVA Manager
How to get a CVA?
A company insolvency expert at Focus can guide you through the process.
Company Voluntary Arrangement Process
An Insolvency Advisor at Focus will help you explore your options. They will discuss the company’s financial position with you, review the company’s viability, financial forecasts and background.
Insolvency procedures, such as a Voluntary Liquidation, CVA or Administration are explained and explored.
Our consultation and advice are completely free of charge.
Preparing a proposal
A Company Voluntary Arrangement proposal is drafted by the company directors with the assistance of one of our Insolvency Practitioners, known as the Nominee. The proposal is sent to the company creditors outlining the CVA and giving them notice of the creditors meeting.
Getting your proposal approved
At the creditors meeting at least 75% (in value) of the voting creditors must approve the CVA for it to be passed. The approved CVA legally binds everyone to the arrangement whether they voted or not.
During the CVA
During the CVA the company makes a single monthly payment to Focus Insolvency and this is distributed to the creditors. The fees charged by Focus Insolvency will be agreed with the creditors and deducted from these payments.
Completing the CVA
The CVA will come to a successful conclusion on or before its (normally) 5th anniversary and any outstanding unsecured debt will be written off and the company is legally free from debt.
Important: Directors’ Obligations
Directors of a company have a legal obligation to seek appropriate advice or take action if they believe the company has an insufficient cash flow to pay its debts as and when they fall due.
If they don’t, then Directors can find themselves personally liable for the debts that they have accrued since they should have taken those steps.
The “Company Director Disqualification Act (1986)” deals harshly with Directors who ignore the early warning signals and continue to trade.
If you believe that your company has failed any of the above tests, it is crucial that you take immediate action to address the company’s insolvent situation.
Get A Free CVA Consultation
We are the Focus Insolvency Group and have years of experience in dealing with complex matters for personal and corporate debts.
Speak To Us About
Company Voluntary Arrangements
The sooner you seek advice, the more chance your business will be able to survive.
